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"Path to Prosperity?" Paul Ryan's Medicare Plan Looks Like a Path to the Poorhouse

If Americans who are embracing Rep. Paul Ryan's "Path to Prosperity" -- and that now includes Mitt Romney -- spent a few minutes reviewing a few recent research reports, they just might conclude that the Wisconsin Republican's plan to reduce the deficit might better be renamed the "Path to the Poorhouse" because of what it would mean to the Medicare program and many senior citizens.

Ryan's proposal, which will get new scrutiny now that Romney has made him his running mate, would end the current Medicare program for everyone born after 1956. It would replace Medicare with a system in which beneficiaries would receive a set amount of money from the government every year to buy coverage from private insurers. That money would go straight into insurance companies' bank accounts, which would make them far richer and even more in control of our health care system than they already are.

While the amount of money beneficiaries would receive would depend on their health status, the average 65-year-old would get $8,000 under the Ryan plan in 2022, the year it would take effect. That's the amount the current Medicare program is expected to spend on the average 65-year-old that year. After 2022, the annual increase in the "premium support" payments would be based on the consumer price index (CPI). And therein lies one of the biggest problems for anyone hoping to live long enough to enroll in Medicare and stay alive for a few years.

Last month the government reported that the consumer price index had increased 1.7 percent between June 2011 and June 2012, meaning we've been paying on average 1.7 percent more this year than last year for goods and services. The cost of medical care, however, shot up 4.3 percent -- more than two and a half times the CPI. And that was not an aberration. The cost of medical care has been rising faster than the cost of just about everything else in this country for years. That's one of the reasons why private health insurance premiums have been increasing so rapidly. That and the fact that insurance corporations have to report a big enough profit every quarter to satisfy their shareholders and Wall Street analysts.

Health insurance premiums rose nine percent in 2011 to an average of $15,073 for an employer-subsidized family plan, according to the Kaiser Family Foundation. Over the past 10 years, premiums have increased a "whopping" (Kaiser's word) 113 percent, much faster than wage increases and general inflation. So you can see what almost certainly would happen to Medicare beneficiaries beginning in 2022: They would have to shell out more and more money out of their own pockets every year just to cover the premiums their private insurers would charge them.

That's bad enough, but consider this: Health insurers began implementing a strategy several years ago to move all of us into high-deductible plans, meaning every one of us will soon be paying (if we're not already) thousands of dollars of our own money for medical care before our insurance company will pay a dime. Insurers adopted this strategy because they have failed miserably at controlling health care costs. If you can't control those costs, the only way you can make Wall Street-pleasing profits if you're an insurer is to keep hiking premiums and shifting more of the cost of care to policyholders.

Under the privatized Medicare program Ryan envisions, the effect of that cost-shifting strategy would be disastrous for the growing number of senior citizens who are finding that every year they have less and less money to make ends meet.

Almost half of Americans now die with virtually no financial assets, according to a recent study by economics professors at Harvard, MIT and Dartmouth. They found that 46.1 percent of Americans are now dying with less than $10,000 (19 percent die with no financial assets at all) and that many rely almost entirely on Social Security benefits for support. Not surprisingly, those people are disproportionally in poor health.

"With such low asset levels, they would have little capacity to pay for unanticipated needs such as health expenses or other financial shocks or to pay for entertainment, travel, or other activities," the professors wrote.

Those findings are not so surprising when you look at other recent measures of Americans' wealth and our ability -- actually, our inability -- to save money. The Federal Reserve reported in June that, after adjusting for inflation, median family income fell to $45,800 in 2010 from $49,600 in 2007. The recent economic crisis also took a big toll on median home equity, which fell during the same period from $110,000 to $75,000, and family net worth, which plummeted 40 percent from $126,400 to $77,300.

For the relatively wealthy Americans lucky enough to have a 401(k), most of their account balances are not nearly high enough to be of significant help when they retire. According to Fidelity Investments, the country's largest 401(k) administrator, the average account balance among its customers at the end of June was $72,800, which is down 2.4 percent from March and about the same as it was in June 2011. And balances in Health Savings Accounts are also low -- averaging just $1,494 in 2010, according to J.P. Morgan.

So one has to wonder how Messrs Ryan and Romney think making our senior citizens pay a lot more for care under a privatized Medicare program could even remotely be a Path to Prosperity for most of us. Could it be that they're not thinking -- or even caring -- about most of us but about people who, like them, have such big 401(k) accounts they'll be able to do just fine in their golden years regardless of how Medicare is structured?

Wendell is a senior analyst with the Center for Public Integrity and continues to advise the Center for Media and Democracy on health policy.

Comments

The real message here is the US is going to go broke trying to support Health Care. The issue here is whether it is the government that goes broke or the people that go broke.
The US has the highest obesity rate (26%) in the world because of poor diet and lack of exercise. People have to stop smoking, eat right and get proper exercise if the US is to save themselves from a crippling rate of diabetes, cancer and heart disease. A million dollars worth of prevention is worth a billion dollars worth of health care.

That doesn't have to be the question. If the US switched to a single-payer system, it would have far more leeway to control the cost of health care. And some of the money saved could go into educating and encouraging people to take better preventative care of themselves, since you're correct that that would be less expensive still.

A single payer system would enable medical providers to do preventative health care, allow for time to do teaching of whole foods diets and healthy self care.. based on understanding. Turning medicine into a business with financial goals and quotas, and selling care to the public by the "minute" is not the calling of healing and caring that medicine has always been prior.
In the old days, the healers were often themselves the test subject, and many died in service to others. No one wants to die, and if you do not have to, that is all the better, but the spirit has changed. Now its a business, and the stock in trade is your illness.
A single payer system could be both a business and a calling. It only makes sense to consolidate services, do bulk buying of supplies and controlling the costs of care. Why do we need three MRI machines in a city block? Easy, so every medical group can overcharge us for the MRI service and make the profit for themselves.
We could learn from Canada, and take the best.. but handing it over to business men and insurance companies .. is not going to make you healthy. As Bill Maher said.. there is no money in wellness, there is no money in death... the money is in the middle, half dead, drug saturated, unhealthy inpatients, who need lots of care and studies.

This entire debate, the real facts about how this will play out for people, and the ever increasing health care costs are the best advertisement for single payer system there is. I use to be staunchly against it, most often sided with GOP over the years and now regret it. I have spent 27 years as a compliance officer in one of the country's largest insurance companies. Folks, you have to stand up and say no to the GOP and Romney-Ryan. Their idea of a future is no future for you at all.

Back in the early days of the Obama Administration when the Republicans were fighting so hard to block expansion of the Childrens Health Insurance Program, Senator Charles Grassley was bemoaning how "devastating" to the private insurance industry how such expansion would be. There one insurance company is/was located in his home state of Iowa in the city of Des Moine, that deserves to be put out of business! That company was American Republic Insurance Company. Because of my mild to moderate ulcerative colitis (which is well controlled), that company would not touch me with a "ten-foot colonoscope" with respect to offering me any form of health insurance product, but would sell me a badly overpriced life insurance product. At the same time, when no company would underwrite my late wife for any new life insurance product because of her recently discovered polycystic kidney condition, they would offer he a health insurance product, with any form of kidney condition excluded from coverage, of course. One year later, at the urging of the then family financial advisor, the product was to be dropped. In the state of Kansas, a salesman is allowed under these circumstances to make a last ditch sales call. When it became obvious that the life insurance product was going to be replace, he told, out of frustration of an article that appeared in one of its internal company publication in which the underwriters were chortling over how "cute and clever" they were in that they would issue health insurance for a skydiver, but not life insurance!

Checkout this wonderful movie. Made by Americans, it is a comparison of the Canadian and US systems. Very well done, fun, and informative. Kiefer Sutherland narrates. Buy two copies, one for you and one for a friend. I have seen it and it gets rid of the propaganda.
healthcaremovie.net